Feb 25th

In 2018, the number of different trades that consider surety bond as an industry-standard is ever-growing. Contractors, liquor retailers, auto dealerships, collection agencies and travel agencies all need surety bonds. Nonetheless, the list goes on and on, which is why, nowadays, even private schools and auctioneers may be required to acquire one.

In theory, obtaining a surety bond should be a simple process. You apply for a bond, submit supporting documentation, pay the premium and get issued a bond. Unfortunately, simple does not necessarily mean easy. What if, the financial history of your company isn’t all that great? Could past negligence come back to haunt you? In other words, can you still get bonded with bad credit score? Let’s find out!

1. What is exactly a bad credit

Before we even start discussing a probability of you having a bad credit, we must first discuss what actually a bad credit score actually is and how does one get it. In general, things that most commonly cause one to have a bad credit score are things like late payments, collection accounts, defaulting on a loan, foreclosing or filing a bankruptcy.

Surprisingly, while bankruptcy may seem like the end of the world to some people, there are different types of bankruptcy, some of which may still allow you to get a surety bond. In other words, no situation should be deemed as desperate before all the factors are considered. Put simply, having a bad credit means that you are unreliable when it comes to your fiscal responsibilities, which will cause fewer banks, credit unions and even bond issuers to work with you. Now, the very term unreliable can be quite ambiguous, which is why all of these organizations had to come up with a scoring system called FICO. As far as the scoring goes, most systems range from 300 to 850, where 700 to 850 are considered to be excellent, 682 is average, while anything lower than 620 is considered to be a low credit score.

2. Not all bonds are concerned with credit score

While some bond issuers may be too preoccupied with your credit score others pay no mind to it, seeing as how they see it as something completely unrelated to the issue. Most companies, however, look for a compromise between these two methods and either issue the so-called high-risk surety bonds or try to help their future clients get the most out of the specific situation.

Another thing you need to keep in mind here is that there are numerous differences ranging from state to state. For instance, getting a California surety bond with bad credit is possible for most license and permit bonds. On the other hand, this might also depend on the type of the bond in question, seeing as how, in the aforementioned state of California, court bonds are yet another hot topic.

3. Downsides and factors to consider

In the previous two sections, we mentioned that it’s definitely possible to get a surety bond with a bad credit rating, however, sometimes there’s a catch. In general, high-risk surety bonds tend to be more expensive. Still, as we mentioned, some volume bonding companies don’t even bother with your credit rating, which means that it isn’t even a factor.

In other words, the factors you should focus on, bad credit or not, are the facility of the process, the rates that you will have to cover and the reputation of the bond producer. As for the rate, which is something that interests people the most, the majority of surety bond providers have their own rate calculator, to help out people deal with math. Moreover, top providers usually also have a comparison tool, which puts their offer side-to-side with those of their competitors. In this way, you get a much easier and graphic way to weigh in pros and cons for both sides.

4. Checking your credit score

Throughout this post, we went on and on about one’s credit score, without even pausing to discuss how one can check their credit score. When it comes to the formula, payment history is about 35 percent of your credit score, that comes to no surprise.

The next biggest contributing factor is the amount owed, which amounts to 30 percent of the credit score. The length of your credit history is the next 15 percent, while 10 percent goes to the number of types of credit in use. Needless to say, account inquiries are the last 10 percent. Once again, those who hate doing the math can always look for free credit score calculators online.

Conclusion

As you can see, having a bad credit or even declaring bankruptcy doesn’t mean the end of the line as far as surety bonds are concerned. This is definitely a saving grace, seeing as how some industries nowadays mandate these bonds as completely obligatory. Naturally, things differ from company to company and even between bond types. You see, contract and license bonds are not the one and the same thing and even within these categories, there are some significant discrepancies. Nonetheless, where there’s a will there’s always a way and you should never start despairing before properly doing your research.

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